Lifting a stay to pursue arbitration—Gardner v Lemma Europe Insurance Company Ltd (in liquidation)

Lifting a stay to pursue arbitration—Gardner v Lemma Europe Insurance Company Ltd (in liquidation)

In what circumstances would it be appropriate for a court to lift an automatic stay to allow a party to pursue arbitration? Charlotte Cooke, barrister at South Square, considers how the decision in Gardner v Lemma Europe Insurance Company informs our understanding of the court’s discretion.

Original news

Gardner v Lemma Europe Insurance Company Ltd (in liquidation) [2016] EWCA Civ 484, [2016] All ER (D) 175 (May)

The Court of Appeal, Civil Division, dismissed an appeal against a judge’s refusal to lift an automatic stay on proceedings being brought against the respondent, a company in liquidation. On the facts, the applicant had not established that he had a seriously arguable claim for an indemnity under his insurance policy with the respondent and, in the circumstances, the judge had not been wrong to refuse to exercise his discretion in favour of lifting the stay.

What practical lessons can those advising take away from this case?

The main practical lesson to be taken away from this case stems from the Court of Appeal’s view as to the circumstances in which it might be appropriate to lift the stay. Patten LJ, with whom Kitchin and Floyd LJJ agreed, expressed the view that, in the absence of any challenge to the competence of the courts of the other jurisdiction to determine the dispute in the liquidation, the need to preserve the estate for the benefit of creditors outweighs the contractual right of the insured in this case to have his claim determined in England.

What was the background to the hearing?

This was an appeal against the dismissal of an application seeking permission to lift the stay on proceedings in the UK against Lemma Europe Insurance Company Limited, a Gibraltar insurance company which is in liquidation.

The liquidation had been recognised in the UK by an order of Briggs J and the effect of that order had been to impose an automatic stay on proceedings against Lemma pursuant to Article 20 of the UNCITRAL Model Law, as set out in Schedule 1 to the Cross Border Insolvency Regulations 2006, SI 2006/1030.

Mr Gardner, whose claim for indemnity under a policy with Lemma had been rejected by the liquidator, sought an order lifting the stay in order that he could pursue arbitration proceedings in respect of his claim to be indemnified.

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.